Flirting with disaster

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Following Arepa UK's acquisition by The Revival Company, its managing director Rodger Arneil announced his departure. Here he reflects on 20 years in the commercial disaster recovery market, giving a personal perspective on the current drivers behind the sector's transformation

Having worked in the commercial disaster recovery sector for almost two decades, I believe it lies on the brink of major change. But to better understand the current shifts, the market should be placed in its historical context.

My first introduction to the sector came back in 1986 when - with the encouragement of the Poland Underwriting Syndicate at Lloyd's - I got involved in setting up a small London-based restoration company, Damage Control. This grew rapidly, with the support of Sun Alliance and some major contracts with London Underground. Back then the market looked very different. It was still taking its first faltering steps towards the transparency, detailed reporting and professional standards that remain the goal of serious players in the market today.

Thanks to the vision and support of Sun Alliance claims manager Maurice Allan and Neil Jackson, his assistant at the time, we received our first jobs from loss adjusters. Adjusters were asked to contact Damage Control and ask what could be done, what the effect would be, and the likely cost of restoration. Although many loss adjusters were none too enthusiastic initially, the idea of equipment restoration gradually gained acceptance as part of the 'claims cycle'.

New venture

In 1990 I set up Relectronic Remech as a joint venture between Royal and Sun Alliance and Siemens. It is my belief that, at the time, this operation represented a new high watermark in technical excellence and professionalism. Relectronic's technical approach was based on research carried out in the Allianz laboratories in Ismaning near Munich, where the viability of restoring electronic equipment was first established. Wil Tondok and Rupert Pentenrieder of Relectronic Gmbh pioneered the restoration process - supported by major German insurance companies, such as Allianz and Munich Re. This technology was then exported to the UK, France, Italy, Belgium, Holland and Australia. And - slowly but surely - equipment restoration became accepted practice on a global basis.

Relectronic grew to become a technical leader in Europe, the US, Asia and the UK and, in 2000, was acquired by its main competitor Belfor, which was looking for a technical partner. New markets were developed in the Middle East, Far East, and South Africa.

Then in 2003 I was asked by ISS to help it enter the UK disaster recovery business. On its behalf, I acquired three companies with DR operations. The first was a small company called Electromec set up by two former Relectronic Remech employees. Acquisitions of Ark and General and restoration franchise Rainbow followed. Disillusioned with the ad hoc nature of the DR business, ISS subsequently closed or consolidated many of the acquired companies. But the UK acquisitions have survived and continue trading to this day.

At that point, in 2005, there was clearly a vacant niche in the UK market for a specialist engineering company to fill the void left by Relectronic, which was how I got involved in setting up Arepa UK - a small specialist company staffed by people with a strong technical heritage and pedigree. With backing from the Denmark-based Arepa Group, this operation has made steady progress over the past three years - building recognition and support within the sector and gaining the confidence of key insurance claims and loss adjusting decision-makers.

For an emerging company to break through the barriers set up by supply chain managers is no mean feat. Without the advocacy and support of the 'hands on' claims staff, it would certainly never have been possible. So what lay behind this support? Essentially, I believe decision makers in this industry - and insurers in particular - are increasingly persuaded of the value of using a DR provider with an explicitly technical focus and are more open than ever before to a service offer based on specialist expertise. This will put pressure on all companies in the sector to strengthen their technical expertise and effectiveness in handling disasters - and bring a professional approach to managing policyholders' expectations.

Changing times

What accounts for the insurance industry's changing attitudes to DR? Partly it is a function of the maturity of the insurance sector and the various markets on which it draws for third-party services; the insurance industry does eventually take on board the lessons of past experience. In recent years, the combination of subdued investment returns and competitive pressure on rates in many classes has starkly underlined the need to both rein in and accurately predict claims costs - hence the hazards of relying on less professional providers in areas like DR.

Loss adjusters, who play a crucial role in managing and orchestrating the DR process, are also increasingly under pressure to sharpen their understanding of technical damage management.

This is leading to the emergence of a new breed of damage management consultants brought in to advise adjusters on losses - independently monitoring, checking and costing work carried out by damage management companies. These consultants apply their expertise to help adjusters ensure technical issues are properly managed, health and safety procedures applied, projects accurately priced and claims brought to a satisfactory conclusion.

Wider factors are also at work: demographics, climate change, new builds on floodplains, the threat of terrorism - all of these are creating new pressures on the private and public sectors, underlining the need for improvements in DR services and coverage. Many of these concerns will no doubt be aired afresh with the publication later this year of The Pitt Review (Learning Lessons from the 2007 Floods), which will contain final conclusions.

Hopefully, the Pitt Report will include some consideration of the benefits of greater co-operation between insurance carriers, fire brigade services and the DR community in delivering more responsive and proactive help to those affected by fire or flood. It would also be refreshing to see explicit recognition of the role to be played by specialist commercial disaster businesses in supporting the public services. It is increasingly obvious that a joined-up approach is required to bring all available resources together.

Perhaps the most encouraging aspect of the current changes in the DR sector is the growing awareness among senior claims management of the need to draw on both generalist and specialist contractors. No one disaster company has the skills or resources to service all requirements. This has become increasing evident in the everyday management of major and general losses, and was dramatically illustrated during the 2007 floods.

With the continuing encouragement of an increasingly sophisticated and enlightened insurance community, I have no doubt that the DR sector will continue to evolve towards a more professional and technically specialised standard of service provision. Insurers' changing attitudes should also enable and encourage recovery companies to invest in new technology, techniques and management expertise - all of which ultimately benefit insurance companies and policyholders alike.

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